Cloud’s weapon, Ultima Weapon, can be obtained by defeating the Ultimate Weapon – a massive poly-transformer-type-robot flying round all over the show.
Defeat him (you will have to fight him three times in different locations) and you will receive Ultimate Weapon. This weapon does max damage when Cloud’s HP bar is full. If it isn’t full, it will do less damage, and in fact the color of the weapon changes once your HP is low.
So be sure to keep Cloud’s HP at full, if needed – use Cover on another party member materia so that cloud never gets attacked (that’s one way to do it) – or alternatively, equip Mystile as it has very good evasion and the majority of attacks against Cloud will miss.
Obtaining Clouds Ultimate Weapon